Limited Company Split

Limited Company Split

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I have a limited company trading client with two directors / equal shareholders.

One of the guys produced all the customers and dealt with all the administration, the other guy took equal salary and dividends. Now he has left the company (but is still director and 50% shareholder) and is demanding money!

I just wondered if anybody could contribute any 'real-life' experience. The remaining director is thinking of setting up his own separate limited company and starting doing business with 'his' customers and telling the other guy "sorry, our company has ceased trading and there are no assets". The business is divided into individual contract assignements.

Would the other guy have any claims against the limited company (good luck with that) or, more importantly, against the co-director?
Frustrated

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By skylarking
09th Jul 2008 09:10

Not very much help, but
When such clients first come to see me I always recommend they see a solicitor and have an agreement drawn up that lays down what happens when one of them doesn't want to do it anymore. All business relationships come to an end at some point so it is a false economy to ignore the fact.

With regard to the stalemate, I have had some experience. It took a cool head, magnanimity skilfull negotiation and an absence of ego (on the part of one of the owners, not me) to resolve matters.

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By neileg
08th Jul 2008 16:57

Deadlock
With a 50/50 split, you're stuck. You can't remove the inactive director without a majority, and you don't have that. And he does own half the company. Maybe that looks like a mistake now, but that doesn't change the facts.

On the face of it, trading through a different legal entity seems that best option, but things can still be complicated if the inactive director wants to get even more awkward.

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By User deleted
08th Jul 2008 15:38

.
if the other guy has left then he wont get any salary but as a director can in theory influence dividends.

therefore remove him as a director which is easy enough.

the remaining guy (who does all the work) can then take a bigger salary and/ or bonuses and not pay any dividends at all - the old guy will have no claim to any money at all.

failling that arbitration may be the only way forward

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